It seems so simple and so obvious on paper: don’t spend more than you take in, and you won’t go in the hole financially.

 

It’s a bit more complicated – yet important – to implement that rule in the complex world of budgets, contingencies, and hard-to-predict revenue sources.

 

Finance director Scott James proposed the council adopt a gap policy, where the mayor and council would be required to revise the budget when spending exceeds revenue by a set percentage.

 

“This is the meat and potatoes,” he said. “The onus falls on the mayor to ultimately present a plan to the council.”

 

If the city is spending 1 to 3 percent more than it’s taking in, it goes into watch stage, James said. No action need be taken just yet; but the council would be made aware of the direction it’s going.

 

A gap of 3 to 5 percent would put the city in “moderate” status, requiring a series of steps and a set timeline in which to close the gap back to at least watch mode, if not zero.

 

Mayor Joe Marine would have three months to present a plan, which the council would discuss and eventually adopt.

 

Under this proposal, it would have two years to carry out the plan and bring the gap back to watch level or zero.

 

“Again, we want to be careful how we adjust our over-spending, so we don’t shock the system,” James warned. “That could have potentially dire effects on the city’s ability to offer services.”

 

More than a 5-percent gap triggers “severe” mode, with stronger steps in which to reduce the over-spending.

 

Mayor Marine (or a designee) would have three months to create a plan to fix the deficit, and the council would have two months to refine and adopt it. The city would have to provide the council and citizens quarterly reports on its progress.

 

The reports would include any new revenue sources needed, and clearly explain the impact of each proposed tax increase and reduced spending on citizens.

 

Where are we right now?

 

At 8 percent, James said, meaning the city is spending 8 percent more than it’s taking in. A good part of that is intentional, however, since the council determined earlier that it actually had more in reserve than is recommended.

 

Illustrating the complexity of budgeting and gap-closing, Councilmember Tony Tinsley thought finance director James’ proposal wasn’t harsh enough in reining in potential out-of-control spending by the council.

 

“This reflects a lot of thoughtful work, and I appreciate that,” he said.  “But I have difficulty supporting it (as presented).”

 

A stronger trigger in the watch stage would prevent the city from moving up to the moderate and severe stages, he said.

 

“What I like about it is that it takes a serious look at the budget and articulates a timeline, giving us a reasonable amount of time to adopt it,” he said.

 

However, Tinsley said, the policy doesn’t go far enough. The city would have two years to close the gap back to moderate range and another year to get to watch status, he said.

 

“That’s a significant flaw – if we’re really going to take this seriously, we need to add some teeth to the watch level,” he said.

 

Council President Randy Lord suggested putting any gap in perspective: if the city has $100 million in the bank, closing the gap has some flexibility; at just $20, in reserve, it’s more severe, he explained.

 

Charlie Pancerzewski cautioned the council to always be aware of expenditures outside the budget, such as the $400,000 building the city purchased for the Chamber of Commerce and other citizen organizations.

 

“Then it came out that you had to spend $50,000 out of the general fund in order to use the conference room,” he said.  “The council a couple of years ago reluctantly approved $30,000 for a float, then the price was $50,000, then you needed a $50,000 building to store it.”

 

Now that $100,000 price tag doesn’t include electricity for the building, he said.

 

What could that money have gone toward?

 

Pancerzewski pointed out that the city didn’t have enough money to upgrade the fire department’s respirator equipment, which it could have done with $30,000 of its own money plus the matching funds it would have received.